An independent firm of experts is set to review the cost overruns and delays experienced at the Oyu Tolgoi underground project, in Mongolia, Rio Tinto-controlled Turquoise Hill announced on Tuesday.
The board of Oyu Tolgoi, 66% owned by Turquoise Hill and 34% by State-owned Erdenes Oyu Tolgoi (EOT), has agreed to form a special committee, comprising members nominated by both parties, to review the cost blowout announced last year.
Oyu Tolgoi is set to cost between $1.3-billion and $1.8-billion more than the original $5.3-billion capital estimate.
Each shareholder of Oyu Tolgoi, as well as Rio Tinto, as manager, had to cooperate with the work of the special committee and had to contribute, on a confidential basis, any internal or third-party reports in its possession relating to the cost overruns and delays, Turquoise Hill said.
Oyu Tolgoi’s funding plan has been under scrutiny in recent times, with hedge fund Odey recently raising concern over the project finance package for the mine. Turquoise Hill last month started arbitration against Rio Tinto to seek clarity on financing for the project.
This week, activist investor Pentwater Capital Management, which holds a 9.23% stake in Turquoise Hill, accused Rio Tinto of mismanaging costs and unfairly restricting Turquoise Hill’s ability to obtain finance to pay for these costs.
"Turquoise Hill fully supports our government partner, EOT, in securing an independent and objective review of the cost overruns and delays announced last year,” said CEO Ulf Quellmann.